Clean Air Act

1970 reaction to Rachel Carson in her 1962 in Silent Spring, It describes one of a number of pieces of legislation relating to the reduction of smog and air pollution in general. The legislation forced the country to enforce clean air standards to improve health and showed that American was moving towards certain environmentalist measures.

Silent Spring

A book written to voice the concerns of environmentalists. Launched the environmentalist movement . Had suspicion that the pesticide DDT (Negative externality), by entering the food chain and eventually concentrating in higher animals, caused reproductive dysfunctions. In 1973, DDT was banned in the U.S. except for use in extreme health emergencies.

Positive externality

Negative externality

A situation where a third party, outside the transaction, suffers from a market transaction by others (pollution, traffic congestion, dogs barking at you when you're walking ,etc,.) Leads to larger quantities than socially desirable.

Private cost

Coase Theorem

The proposition that if private parties can bargain WITHOUT cost (or very little cost) over the allocation of resources, they can solve the problem of externalities on their own, proposed by Ronald Coase, other words this sould work if there are no transaction costs.

Internalizing the externality

Education

A prominent example of a positive externality, the consumer of it becomes a more productive worker and reaps the benefit of higher wage. Also leads to more informed voters, which leads to a more efficient government, lower crime rates, and higher levels of technological innovation. Internalizing this externality requires the use of a government subsidy.

Regulation

Command and Control Policy

Forms of regulation that depend on government laws and agencies to enforce rules, including such things as regulated limits on pollution or fuel efficiency standards; contrasts with market-based or incentive-based approaches.